2011 May See Decline in Chapter 7 and Chapter 13 Personal Bankruptcy Filings

Economists and legal experts believe that 2011 could see a slowdown in personal bankruptcy filings. As indicators point to an improving economy and consumers borrow less money, “there is less reason for people to take the step of filing for bankruptcy” according to University of Illinois Professor, Robert Lawless.

American consumers filing for Chapter 7 or Chapter 13 topped 1.5 Million in 2010. This number represents an increase of 9% from 2009. The Southwestern and Southeastern States accounted for a majority of the increased filings last year. It appears that conditions in the Southeast have improved to some degree with decreased filings in states like Tennessee, South Carolina, and Alabama. However, communities in the Southwest remain mired in the economic turmoil experienced by numerous households across the country. Both California and Arizona saw an approximate 25% increase in bankruptcies from 2009. The economic crisis has forced individuals to make difficult choices or uncomfortable compromises with regard to managing their monthly budget. Numerous households have been forced to make these decisions with regard to their houses or mortgages.

Here in the Sacramento metropolitan area I have met many people who continue to hold onto mortgages they cannot afford because they are unable to get a loan modification or, until real estate values rebound, refinance their property. The fact remains, however, that personal bankruptcy is available to individuals who have extreme amounts of debt and are unable to pay their financial obligations. Eliminating staggering debt, or creating a plan to repay it, can help individuals use their financial resources more efficiently to meet other financial obligations.

With personal bankruptcy filings reaching such high numbers most individuals will have come into contact with someone they know who has been impacted by the economic downturn and has sought relief through the Bankruptcy process. While some people may experience personal shame or guilt by resorting to this process, they need to understand that the decision to file for bankruptcy is merely an economic decision and not a moral one.

As a Sacramento Bankruptcy Attorney I was disappointed, but not surprised, to see the overall number of filings in 2010 reach a staggering level. Fortunately, as noted in the Wall Street Journal, economists and legal experts predict 2011 will be a better year for individuals. My office represents individuals of all income levels and backgrounds who have considered Bankruptcy as a possible solution to deal with overwhelming debts. The majority of my clients have used Chapter 7 or Chapter 13 as a last resort to manage the unfortunate circumstances they face financially.